Hints from European Central Bank chief Mario Draghi that any exit from quantitative easing would be gradual helped boost the FTSE 100 on Thursday (8 March) as it closed up 0.6% above the 7,200 mark.
Next Tuesday (13 March) US inflation figures are released. These are likely to be closely followed as concern over the impact of rising inflation on the pace of interest rate hikes was a key factor behind the recent market correction. The same day a ‘Spring Statement’ from UK Chancellor Philip Hammond is announced. It is not expected to contain substantial measures or detail which will have to wait until the full Budget later in the year, but Hammond is still likely to be under scrutiny given the current tensions over Brexit. In the early hours of Wednesday (14 March) Chinese industrial production data is out. An update on US retail sales will be delivered later in the day. The week will be rounded off by the building permits release, which offers a good insight into the state of the housing market across the Atlantic.
The apparently sleepy and dull paper and packaging sector sparked into life this week. On Tuesday (6 March) Smurfit Kappa (SKG) received a surprise takeover approach from US-based International Paper. This lifted its own share price as well as those of peers like Mondi (MNDI), DS Smith (SMDS) and RPC (RPC) No details were given as to the value of the approach. Smurfit’s board has rejected the bid, suggesting it doesn’t reflect the true worth of the business.
International Paper is a big player in the North American market. Owning Smurfit would also give it a significant position in Europe and Latin America. As such, Smurfit shareholders will probably want a very large bid premium before they agree to a takeover. WestRock and DS Smith are among the companies in the sector recently making large acquisitions. WestRock, the second biggest player in the US after International Paper, struck a deal to buy KapStone for $4.9 billion. DS Smith made its first move into the US market last year with the £722 million acquisition of Interstate Resources. Previous packaging takeovers on the UK stock market include former AIM-quoted Powerflute being bought by Nordic Packaging, and subsequently sold to Mondi. British Polythene Industries was acquired by RPC.
The Spring Statement from UK Chancellor Philip Hammond next Tuesday (13 March) will take place amid a ratcheting up of the Brexit process as both the EU and UK look to agree a transition agreement. Business leaders, desperate for clarity, will be looking for an agreement to be more or less in place in time for a meeting of the European Council on 22 March.
It can be difficult for ordinary investors to gain exposure to the bond markets. One option is to use exchange-traded funds. iShares Global Corporate Bond (CRPS) tracks a basket of debt issued by some of the world’s largest companies for an ongoing charge of 0.2%.
14 March – Investors are eagerly awaiting Dignity’s (DTY) full year results as it provides the first opportunity for the company to comment on the implementation of its new pricing strategy which triggered a major profit warning in January. However, it may be too early to get any solid feedback, particularly as Dignity said in January that it expected to give a proper update on progress and sales volumes at the half year results in August.
14 March - Last year was difficult for Hikma Pharmaceuticals (HIK) after it was forced to cut its sales guidance three times amid competitive challenges in its US generics business. When the drugs business reports 2017 results, investors should look for details on how bad price and volume erosion for its generic drugs is expected to be in 2018. There may also be updates on Hikma’s delayed launch of VR315, a generic version of GlaxoSmithKline’s (GSK) asthma treatment.
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